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Fast Comment NorwayMainland GDP growth bouncing back; rate hike in March

  1. Mainland GDP growth of 0.9 percent in Q4; matching our estimate and above consensus and Norges Bank
  2. Rising petroleum investments will continue to add to growth in 2019
  3. Rate hike in March
Mainland GDP growth of 0.9 percent in Q4; matching our estimate and above consensus and Norges Bank
Mainland GDP growth pulled up to 0.9 percent q-o-q in the final quarter of 2018, matching our estimate. The outcome was slightly above consensus (0.8 percent) and even a bit higher than anticipated by Norges Bank (0.7 percent), although the latter had already flagged upside risk to its own estimate at the latest policy rate meeting. To keep it short, the economy pulled sharply upward again, following what was a temporary slowdown in Q3 (driven by the drought). According to the details, activity was in particular supported by rising petroleum investments, which gave a boost to the manufacturing sector. We expect this impulse to stay strong throughout 2019, on the back of rising petroleum investments. On the softer side, household consumption growth was moderate, owing to a drop in goods consumption. Services, on the hand, rose by a still-solid 0.6 percent, and thus overall consumption expanded by a moderate 0.3 percent. Furthermore, residential investment activity has levelled out. But this adds little to growth; these investments expanded by 0.1 percent q-o-q in both Q3 and Q4. Investments for mainland industries fell further in Q4. Mainland goods exports were solid in Q4, but due to a sharp drop in exports of services, total mainland exports were negative in the final quarter of 2018. All told, the details were weaker than the headline. But we believe some of this will improve throughout 2019, in particular household consumption. However, the key story for 2019 will be the economic support given by the renewed rise in petroleum investments. With regard to Norges Bank, the economy has picked up a bit faster than assumed in the December Monetary Policy report. Even though earlier revisions to the data lowered the annual growth rate in 2018 (2.2 percent vs. Norges Bank’s estimate of 2.4 percent), the activity level is higher. Norges Bank will most likely conclude that overall capacity utilisation is somewhat higher than assumed in December. All told, the data supports our expectation for a rate hike in March.


Marius Gonsholt Hov

Senior Economist


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